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Cite as: [2001] ScotCS 235

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OUTER HOUSE, COURT OF SESSION

A1780/01

OPINION OF LORD MACFADYEN

in the cause

PAUL HARRISON

Pursuer;

against

D M HALL and OTHERS

Defenders:

________________

Pursuer: Party

Defenders: A Smith; Simpson & Marwick, W.S.

16 October 2001

Introduction

[1] In November 1991 the defenders, who are a firm of Chartered Surveyors, carried out on the pursuer's instructions a valuation of shop premises at 84 Queen Margaret Drive, Glasgow ("the shop"), which the pursuer was then considering offering to purchase. The pursuer avers that he relied on that valuation in making an offer to purchase the shop, and that his offer was successful. He avers that he later discovered that there were defects in the shop which were not disclosed in the defenders' valuation report. He alleges that the defenders' failure to discover and report upon those defects constituted professional negligence on their part. He also avers that the defenders negligently over-valued the shop. He now seeks damages in respect of loss and damage which he claims to have suffered as a result of those acts of alleged negligence.

Background

[2] The pursuer holds a degree in Hotel and Catering Management. By 1991 he had a number of years' practical experience in catering management. He had formed the intention of opening a delicatessen shop in Glasgow. In November 1991 the shop was on the market, and the pursuer obtained the sale particulars (No. 5/1 of process), viewed the shop and formed the opinion that it was suitable and well situated for his purpose. He approached his bank with a view to borrowing funds with which to supplement his own funds to an extent sufficient to enable him to purchase the shop, fit it out and set up the business which he contemplated. The manager of his bank, a Mr Black, requested that he obtain a valuation of the shop from a surveyor on the bank's panel of approved surveyors, and recommended the defenders in particular for that purpose. The pursuer accordingly instructed the defenders to value the shop and provide a written report of their valuation. The defenders accepted those instructions, inspected the shop and provided a written report (No. 5/2 of process).

The Report

[3] The defenders' report was dated 22 November 1991, the date on which, according to their averments, the inspection was carried out. The report, after narrating the pursuer's instructions, describing the location of the shop and the shop itself, and calculating the floor area of the shop at 245 square feet, set out the condition of the shop in the following terms:

"From our external inspection, we noted that the tenement building of which the subjects form part has undergone refurbishment in recent years, this including stone cleaning, retiling of the roof and repairs where necessary. Accordingly, no obvious serious defects of a significant nature were noted in this regard. Notwithstanding the above, we would point out that due to the presence of security closes and adjoining buildings we could not gain access to the rear of the property and therefore could not gain sight of the rear wall or rear roof slope. Accordingly we are unable to make any valid comment as to the condition of these areas.

Internally, the subjects were generally found to be in an order consistent with their age and type and again no obvious serious defects of a significant nature were noted.

Generally, the subjects would benefit from selective redecoration and modernisation throughout.

It will be appreciated that we have been instructed to prepare a valuation and not to carry out a structural survey. We are therefore unable to confirm that the premises are free from dry rot, woodworm or other infestations or defects, other than those mentioned, or that the various services meet the requirements of the appropriate authorities. Whilst we have had regard to the repair of the property in preparing our report, any comments concerning structure and condition are merely a general indication of the standard of the building."

After passages dealing with tenure, servitudes, planning and statutory requirements and assessments, the report concludes with the following "VALUATION":

"We would advise you that, in our opinion subject to the qualifications and assumptions set out in this report, the current Open Market Value of the above subjects may be fairly stated in the sum of £25,000 (Twenty Five Thousand Pounds)."

The Purchase

[4] The pursuer, on receipt of the report, noted that the valuation (£25,000) was considerably higher than the price sought in the sale particulars (offers in excess of £20,000). He telephoned the defenders to ask for their comments on that matter. His evidence was that he was told that if he could buy the shop for the asking price, that would be a good thing, but that otherwise his query about the discrepancy was not answered. Although he had taken up that issue with the defenders, he said in evidence that he did not question the soundness of the value placed upon the shop by the defenders.

[5] The pursuer proceeded to make an offer of £20,250 for the shop. His offer was accepted.

[6] A copy of the report was provided by the defenders to the pursuer's bank. In the event the pursuer obtained from the bank (i) a loan of £15,000 towards the purchase price (the balance of £5,250 coming from the pursuer's own funds), and (ii) a business start-up loan facility of a further £15,000, to be drawn down in a number of tranches, to assist in the fitting-out and stocking of the shop and other expenses involved in commencing in business. The pursuer granted in favour of the bank a standard security over the shop and a postponed standard security over his house. It appears that those were both "all sums" standard securities, but the pursuer's evidence was that his calculation, based on the valuation placed on the shop by the defenders, was that his house would be "at risk" to the extent only of £5000. He thought that, once fitted out, the shop would be worth £30,000.

The Alleged Defects

[7] The pursuer's averments about defects fall into two parts. First, there are averments about wet and dry rot which are in the following terms:

"On taking entry to the shop the pursuer became aware of the fact that timbers within the shop premises were affected by an outbreak of both wet and dry rot. This defect was apparent upon visual inspection of the shop premises at the date of the said survey by the defenders and was so apparent to Messrs Ross & Liddell, Chartered Surveyors, Glasgow, who carried out a preliminary inspection on behalf of their client at about the same time as the defenders carried out their inspection for the pursuer. ... At the time of the inspection by the defenders wet rot was obvious on a reasonably careful visual examination of [the] hardboard panelling at the rear side wall of the back shop under the sink. Further outbreaks were similarly evident along substantial areas of the rest of the hardboard panelling both in the back shop area and the front shop. The wet rot decay at that time affected substantial areas of the lower wall linings including the original 'V' boards and dado strapping throughout the shop under the hardboard panelling. To the left hand rear of the shop in the area of the back shop there was an outbreak of dry rot evident on a reasonably careful inspection on the skirting board."

Secondly, there are averments about rising damp which are in the following terms:

"In addition, at the time of the said survey by the defenders the subjects suffered from rising damp. This rising damp should have been apparent during a reasonably careful inspection at the date of the said survey by a competent surveyor. The rising damp was apparent on a careful visual inspection on the walls of the toilet. The toilet is situated within the common close. The defenders at the time of their inspection had a key for the common close area. Esto the defenders did not have a key to that area at the time of their inspection ... the presence of wet rot on the hardboard wall linings is in any event indicative of the presence of damp and ought to put any reasonably competent surveyor on his guard and suggest to that surveyor that rising damp might be present. In those circumstances such a surveyor would either have carried out further investigations of the wall behind the wall linings or reported the possibility of such a defect to their client and recommended such further investigations. Had those investigations been carried out the presence of rising damp would have been discovered by the application of a damp meter to the wall".

[8] As the pursuer's case developed in the course of the proof, the case relating to the alleged defects came to be more narrowly focused. In the first place, the defenders' report expressly declares that:

"We are advised that toilet facilities are provided in the nearby common close although we could not gain access to this area and are therefore unable to make any valid comment as to their style or condition".

Although the pursuer in cross examination of Alan Gordon, the author of the report, disputed the truth of that declaration, I accept Mr Gordon's evidence (reflected as it is in the terms of the report prepared at the time) that he did not in fact have access to the toilet. In these circumstances it is not, in my view, open to the pursuer to found a case of negligence on what ought to have been found if Mr Gordon had carried out an examination of the toilet. In face of the express declaration that it was not examined and that no comment on its condition was being offered, the pursuer cannot maintain that he relied on the report as an assurance that there was no detectable defect in the toilet. That being so, it seems to me that the case that rising damp was detectable on reasonably careful inspection is restricted to the esto case that investigation of the possibility of its presence ought to have been prompted by the presence of the wet rot in the wall linings of the back shop. In the second place, although there was evidence from a number of sources, which I accept, that at a later date there was rot in the shop which was much more widespread, no evidence was led that wet or dry rot in locations other than under the sink in the back shop would have been detectable by reasonably careful inspection carried out at the material time in the course of a valuation inspection. The result, in my view, is that the whole of the pursuer's case in relation to alleged defects (both the part relating to rot and the part relating to rising damp) was periled on proof that at the time of the survey there was present in the area under the sink in the back shop a visible area of wet and/or dry rot.

The Evidence of Detectable Rot

[9] The pursuer took entry to the shop in February 1992. His evidence was that immediately on taking entry he discovered what appeared to be a serious defect. He described the defect by reference to three photographs, Nos. 32/1, 32/2 and 32/3 of process. Those photographs, which according to the pursuer's evidence were taken towards the end of 1993, i.e. some two years after the defenders' examination of the shop, show an area of defect on a wall in the back shop area. No. 32/3 shows that the defect is on the wall under the sink. The evidence identified that wall as being the right hand wall of the back shop. Nos. 32.1 and 32/2 are progressively closer views of the defect. The pursuer's evidence was that those photographs, despite their later date, showed the defect as it was before any destructive investigation had taken place. He said that the photographs showed the defect as it could be seen at the date of entry. Under cross examination he said that it would be foolish to say that it was exactly the same, but that it had not changed in size by more than 5%. It was not disputed by the defenders that the defect shown in the photographs disclosed evidence of wet and/or dry rot which any competent surveyor exercising reasonable care in the course of carrying out a valuation would have seen and recognised as such. The main issue in relation to this aspect of the case thus came to be whether or not it was proved that the defect, as shown in the photographs, did, as the pursuer maintained, exist in substantially the same form at the date of the defenders' valuation.

[10] Apart from his assertion that the defect shown in the photographs existed at the date of the valuation, the pursuer made a number of other observations about it in the course of his evidence. He said at one stage that "everybody who came into ... the back shop had noticed the substantial defect by the sink", but at that stage he had not established a clear chronology in his evidence, and I think that he was referring to the stage at which he decided to dispose of the business. If he was right, however, that the area of the defect did not increase materially over the period of two years between the defenders' valuation and the taking of the photographs, one would have expected visitors to the shop to have noticed the defect from the outset. Apart from the evidence of Mr Ross, to which I shall return, the pursuer led no evidence from witnesses who had noticed the defect before or shortly after the date of the defenders' valuation. When challenged in cross examination about the accuracy of his recollection that the nature and extent of the defect was the same in 1991 as is shown in the photographs, he said "I am absolutely not mistaken whatsoever. You could ask many people who observed that. I'm simply one of them." He did not suggest that he had himself noticed the defect when looking at the shop before deciding to make an offer to purchase it. I do not understand why, if his evidence about its extent when he took entry is correct, he should have failed to see it when he first inspected the shop yet see it at once on taking entry. He mentioned that his family had visited the shop at about Christmas 1991, but there was no evidence that any of them noticed the defect. He spoke of a representative of the Environmental Health Department visiting and inspecting the shop (as I understood the evidence, at the stage when it was being fitted out), but she did not find the defect. Although he claimed to have seen the obvious defect shown in the photographs when he took entry, he neither raised the matter with the defenders, nor took advice about the nature or significance of the defect, or about the cost of remedial work. Indeed, his evidence about his understanding of the cost of putting the defect right emerged in a curious way. At first he maintained that even at the stage of deciding to sell the shop he had no idea how much it would cost to remedy the defect. Later he said that his own guess as to the likely cost was £6000. No satisfactory explanation for that change in his evidence, or for his failure to pursue the question of what and how serious the defect was, was offered. All of these considerations seem to me to detract from the credibility and reliability of the pursuer's evidence that the defect gave the appearance shown in the photographs from the outset.

[11] The author of the defenders' report was Alan Gordon, who is now a chartered surveyor, but was at the material time a trainee. He began his training in 1987 and eventually qualified as a chartered surveyor a few years after the material date. By 1991 he had been carrying out valuations of the type in question under supervision for a number of years. The supervision took the form that a qualified surveyor would discuss his draft report with him before it was finalised. His inspection of the property was not supervised. Although the pursuer sought to pray in aid the fact that Mr Gordon was not a qualified surveyor in support of his allegation of negligence, I am of opinion that his status as a trainee is not directly relevant in that connection. On the one hand, for the purpose of the case of negligence Mr Gordon's work must be judged by the same standard as would fall to be applied to that of a fully qualified chartered surveyor. On the other hand, the fact that he was not fully qualified is not per se evidence that he did not attain the requisite standard of care. I accept Mr Gordon's view that he was sufficiently experienced to carry out the particular valuation, supported as it was by the evidence of James McManus, FRICS, of Spiers Gumley that he would regard a trainee of four years' experience as adequately qualified to carry out such work. The issue on which Mr Gordon's evidence is relevant in the present case is a simple issue of fact, namely whether at the time of his valuation there was present in the shop the defect alleged by the pursuer. On that issue I found his evidence clear and moderate. It appeared to me to be both credible and reliable. Understandably, he had no specific recollection of the inspection of the shop. I would have found a claim to remember an individual valuation inspection of a small shop carried out almost ten years ago difficult to accept. He explained that the purpose of the inspection was to identify any obvious defects that would materially affect value. Matters that would not affect value or the suitability of the subjects as heritable security would be regarded as insignificant and would not be mentioned in a report. Against that background, when shown the photographs Nos. 32/1 and 32/2 of process he said that had the defect shown in them been present at the time of his inspection he had no doubt that he would have spotted it and would definitely have made mention of it in his report. He denied that he might have overlooked it for lack of light. It was daylight at the time of his inspection and he had a torch. If he had been unable to conduct any part of the inspection properly for lack of lighting, he would have recorded that fact in his report. He would be critical of any surveyor who missed such a defect. I regard Mr Gordon's evidence, although it is in a sense indirect since he does not have an actual recollection of the inspection, as being in accordance with probability and as yielding considerable support for the conclusion that the defect shown in the photographs was not present in that form at the time of the valuation inspection.

[12] The only other evidence bearing directly on whether the defect was visible at the time of the valuation came from Mr Graham Ross, FRICS, of Ross & Liddell, Chartered Surveyors. He was instructed by the pursuer in early 1994 in connection with the proposed disposal of the shop business and inspected the shop in March 1994. He recalled that he inspected the shop on a previous occasion. That inspection took place in October 1991, i.e. shortly before the defenders' valuation. On that occasion Mr Ross was on the lookout for small shop premises on behalf of a client who was interested in purchasing such a shop as an investment. He was aware that the shop was on the market and thought that it might suit his client's purpose. He visited the shop, and as a result decided that it would not in fact be of interest to his client. His reasons for so deciding, as he explained them in evidence, were (i) that there was "a little rot" in the shop, (ii) that the toilet was located in the close and (iii) that there was rot in a safe lintel over the rear door of the close. He was not carrying out a survey or valuation, but merely making a preliminary assessment of whether the shop might be of interest to his client as an investment. He was there for only five minutes. He did not take notes. His recollection was that there was clearly visible, but not extensive, rot in the back shop. He was unable to say in evidence whether it was wet or dry rot. He could not be precise about where in the back shop it was. Although in his report of 6 October 1994 (No. 43/4 of process) he mentioned his two inspections and stated that on the second occasion "the rot was still present", in evidence when the photograph No. 32/3 of process was put to him he stated that his memory did not enable him to say that the rot which he saw in 1991 was in the location under the sink in which it appears in the photograph. He also indicated at a different stage of his evidence that he was unable to say whether the rot that he saw in March 1994 was different in extent from the rot he had seen in 1991. He agreed when it was put to him that the likelihood was that it did spread between 1991 and 1994. It seems to me to be quite improbable that, if the rot seen by Mr Ross in October 1991 had been in precisely the same location as the rot which he saw in March 1994, and had presented almost exactly the same appearance, he would have been unable to say in evidence that it was the same rot. Accordingly, while I accept that in October 1991 Mr Ross saw some sign of rot somewhere in the back shop, I do not consider that his evidence supports the inference that the rot shown in the photographs was present in substantially the same form at the time of the defenders' valuation.

[13] An attempt was made, particularly through the evidence of Professor Alan G. Houston, PhD, FRICS, to estimate the state of development of the rot in the shop in November 1991 by working back from what was observable at later dates, but none of that evidence, in my view, supports the contention that there was in November 1991 a visible defect similar in appearance to that shown in the photographs. Professor Houston, in his original report dated 23 March 1995 (No. 11/4 of process) which followed an inspection a few days earlier, expressed the opinion that the extent of the wet rot attack which he saw, and the characteristics of the decay pattern were such as to lead him to conclude that the outbreak pre-dated November 1991. In evidence, however, he said that on the balance of probability dry rot was not present in 1991. He was unable to express an opinion on whether there would have been any manifestation of the rot on the wall surfaces in 1991. Although the dry rot was of a slow moving sort, he doubted whether it would have presented in 1991 the appearance shown in the photographs. Mr George McGill, an industrial microbiologist with extensive experience in the eradication of timber decay, expressed the view that by 1991 there would have been wet rot at the wall bases, but said nothing about the extent to which there would at that stage have been any outward manifestation.

[14] On consideration of the evidence discussed in paragraphs [9] to [13], I do not find it proved that at the time of the defenders' inspection of the shop in November 1991 there was visible on the wall of the back shop under the sink a patch of rot similar to that which appears in the photographs. For the reasons discussed in paragraph [10], I do not accept as credible or reliable the pursuer's evidence that at the date of entry he found a defect which had substantially the same appearance as is shown in the photographs. Although I accept the evidence of Professor Houston that the rot was probably present in the shop at the time of the defenders' inspection, his evidence does not in my view support the pursuer's evidence as to the form and degree of manifestation of the problem at that date. As I have indicated, I accept Mr Ross's evidence that he noticed some sign of rot in the back shop in October 1991. I cannot, however, regard his evidence as affording support for the proposition that the rot was manifest at that stage in the form shown in the photographs. I accept Mr Gordon's evidence that, if there had been present at the time of his inspection a defect of the nature and size illustrated in the photographs, he would have seen it and would have mentioned it in his report. I accept his evidence that there was no such defect at the time of his inspection.

Negligence in Relation to Rot

[15] The defenders did not dispute that, as chartered surveyors instructed to inspect and value subjects for a party considering making an offer to purchase them, they owed to their client a duty to exercise reasonable care. The standard of care demanded of them is the standard reasonably to be expected of a chartered surveyor of ordinary competence. As I have earlier indicated, the defenders are not entitled to seek to escape from being judged by that standard by virtue of the fact that Mr Gordon was not a fully qualified chartered surveyor. They did not attempt to do so. Nor did they dispute that in the circumstances the exercise of reasonable care required that any defect which was (i) discoverable in the course of a reasonably careful inspection and (ii) likely to have a material effect on the value of the subjects required to be discovered and reported to the client. The pursuer's case, as he presented it, was based on the proposition that the defect visible in the photographs was present at the time of the defenders' inspection. The defenders, moreover, accepted that if there had been in existence at the time of their inspection a patch of exposed rot of the dimensions and in the location shown in the photographs, the failure to report on its existence would have constituted a breach of their duty of care. It was for those reasons that central importance came to attach to the question of whether the defect shown in the photographs was present in substantially the same form at the time of the defenders' inspection. If I had held as a matter of fact that such a defect did exist at that time, I would have found that the defenders had been negligent in failing to identify it and mention it in their report. In the event, however, I have held that it has not been proved that there was in November 1991 a visible defect similar to that shown in the photographs.

[16] That is not, however, necessarily the end of the matter. As I have indicated, I have accepted Mr Ross's evidence that he did see some manifestation of rot in the back shop in October 1991, although he could not say (and I consider it highly unlikely) that it was the same as shown in the photographs. It remains to be considered whether I ought to find in that accepted evidence a basis for holding that the defenders failed in their duty of care. Mr Ross did say in evidence that the rot that he found was something that a prudent surveyor would, if he had been carrying out a valuation on behalf of a client, have drawn to the attention of his client. That in my view goes some distance towards supporting a finding of negligence, but I do not consider that it goes far enough. There is, in the evidence, no way of testing whether any careful surveyor would have noticed the defect that Mr Ross noticed, or would have judged that he ought to draw it to his client's intention. That is because Mr Ross was wholly inspecific about the nature, extent and location of the manifestation of rot that he observed. I therefore do not regard Mr Ross's evidence as an adequate basis for a finding that the defenders were negligent.

The Allegation of Over-valuation

[17] I turn now to the second branch of the pursuer's case. The defenders, as I have already noted, valued the shop at £25,000. The pursuer's allegation is that:

"... at the time of their survey the defenders grossly over-valued the shop. The true value of the shop at the time the defenders surveyed it and had there been no rot present would have been no greater than £19,500 being the best price that could reasonably be expected to be achieved on the open market for a shop of that size in that area at the time when the defenders inspected it assuming that the property was free from latent defect, had a good title and was unaffected by any statutory notice and did not contravene any statutory requirements".

The Evidence of Value

[18] Mr Gordon gave some evidence about the approach which he adopted to the valuation of the shop, although he could not recall the evidence of value that he had taken into account. His approach was to apply the comparative principle of valuation. If the evidence was of the capital value of comparable subjects, the process involved analysing the capital value as a rate per square foot, then applying that rate to the measured area of the subjects being valued. If the comparison evidence was of rental value, a similar exercise of deducing a rate per square foot, and applying that rate to the measured area of the subjects of valuation would be carried out, after which the rental value thus derived would be converted into capital value by multiplying it by the appropriate number of years' purchase. He regarded sales evidence as preferable. Information on comparable premises would come from a variety of sources, including rent reviews, lease renewals, new lettings, sasine records, the defenders' own files and information from other estate agents and surveyors. As I have said, Mr Gordon did not recall the evidence on which he had actually relied. He suggested that his calculation would have relied on a rental value of £10 to £12 per square foot, capitalised at 7 or 8 years' purchase. Those figures, however, applied to the measured area mentioned in the defenders' report - 245 square feet, yield capital values in the range from £17,150 to £23,520, in contrast to the valuation of £25,000 actually given in the defenders' report.

[19] The evidence of value led by the pursuer was given by William M. McVicar, FRICS, who was asked in October 1995 to value the shop as at October/November 1991. His report (No. 11/1 of process) brought out a value of £18,000 (which value ignored the presence of rot or damp - see his letter of 9 October 1997 (No. 11/2 of process)). In a supplementary letter of 16 February 1996 (No. 33/1 of process) Mr McVicar made it clear that in his valuation he had applied a discount in respect of certain inadequacies in decoration and electrical wiring. Had these been in a reasonable state, his valuation would have been £20,300. He expressed the view that a valuer with adequate knowledge, expertise and local experience would not have arrived at an opinion of value of £25,000. He recognised that there was room for difference of opinion, but said that the maximum value of the shop at the relevant date could have been stated at £21,750. In so saying he made reference to Singer & Friedlander Ltd v John D. Wood & Co [1977] EGLR 84 in which the evidence was that the permissible margin of variation of opinion was ±10% or perhaps 15%, but he did not explain the arithmetic by which he arrived at the figure of £21,750.

[20] In evidence Mr McVicar explained his calculations, and the comparative evidence on which he had based his opinion, in more detail. He had measured the floor area of the shop at 234 square feet, some eleven square feet less than the area recorded in the defenders' report. Nothing, however, was said to suggest that the defenders' measurement was negligent. Mr McVicar based his rate per square foot principally on rental evidence from one nearby shop. That shop was at 102 Queen Margaret Drive, was 242 square feet in area, and was subject to a full repairing and insuring lease until 2007, with rent reviews at 5 year intervals. At rent review on 11 November 1991 the rent was fixed at £3000 per annum, which represented £12.40 per square foot. Applying that rate to the floor area of the pursuer's shop suggested a rental value for it of £2900. Mr McVicar then capitalised the rental value at seven years purchase, bringing out a capital value of £20,300. He then applied an allowance to reflect the difference between the condition of the pursuer's shop and that of No.102. The latter was on the market in July 1993 and was described as well maintained, freshly decorated, and with heating. To reflect the fact that No. 84 was in poorer condition, he applied a discount of £10 per square foot from the capital value, yielding a net capital value of £17,960, say £18,000. Mr McVicar sought to justify his capitalisation rate in what struck me as an unusually convoluted way. He said that he had looked at sales of similar shops in the period from the beginning of 1992 to the end of 1995. He compared the sale prices with the rateable value, and found that the former reflected between 10 and 19.5 years' purchase of the latter. The average was 13.9, and he saw in that a pattern of the rateable value being twice the actual rental value, and therefore regarded it as support for his selected years' purchase of 7. As I understood him, however, Mr McVicar initially derived his multiplier of 7 from experience, and carried out the calculation which I have attempted to describe as a check on the figure he based on experience. Under cross examination, he said that he would not be critical of a surveyor who applied 8 years' purchase.

[21] The pursuer also made reference to a valuation report (No. 43/6 of process) prepared by Freemen Macleod, Chartered Surveyors, in November 1995. Their opinion was that the open market value in November 1991 was £19,500. The pursuer did not, however, lead any witness to speak to that report, and the basis of the opinion was therefore not explained.

[22] The defenders also adduced evidence from James McManus, FRICS, of Spiers Gumley. On the basis of an inspection carried out on 12 December 1996 he carried out a retrospective valuation of the shop as at November 1991. His report is No. 15/1 of process, and a supplementary letter of 18 March 1998 commenting on Mr McVicar's report is No. 15/2 of process. His opinion was that the value of the shop in November 1991 would have been £22,500, but he added, "I would not have disagreed with a valuation of up to £25,000". Mr McManus adopted the same basic approach to valuation as did the other witnesses, starting with the floor area of the shop (which he measured at 236 square feet), applying to it a rental rate per square foot derived from comparative evidence, then capitalising the rental value by applying an appropriate number of years' purchase. The rental rate per square foot which he derived from rental and sales evidence was £12.50 per square foot. He had looked at a number of properties analysis of which yielded rates between £11.30 and £14.20. Although he had looked at some material from 1992 and 1993, he said that his valuation would have been the same if he had looked exclusively at material available in 1991. He capitalised the rental value by applying 7.5 years' purchase. His calculation was therefore 236 x 12.5 x 7.5 = £22,125, say £22,500. When asked about the scope for difference of opinion among valuers, he said that he would be delighted if a 10% variation was the largest that he encountered.

Negligence in Relation to Valuation.

[23] It is clear on the evidence that the value struck by the defenders in their report was high. None of the witnesses produced as high a value. Even Mr Gordon's analysis in the course of his evidence brought out a lower value (see paragraph [18] above). There was, however, evidence from Mr McManus that the value was £22,500, which must be taken along with his view that he would not have disagreed with a valuation of £25,000. There is therefore evidence which, if accepted, would support the defenders' valuation as being within the range of values which might have been reached in the circumstances by a competent valuer exercising reasonable care.

[24] The pursuer based his case primarily on Mr McVicar's evidence, taken with the proposition (which he sought to derive from Singer & Friedlander) that the permissible margin of error was 10% or at the most 15%. I do not consider, however, that Singer & Friedlander lays down any rule of law. The margin for error mentioned was one spoken to in evidence by the witnesses in that case, and it seems to me that it would be wrong to treat that evidence as necessarily applying in all circumstances. The approach to valuation adopted by all the witnesses involves multiplying together three variable factors, namely the floor area of the subjects, a rental rate per square foot derived from comparative evidence, and a number of years' purchase. As the evidence in the present case shows, even the first of these is variable within a certain margin. It seems to me, however, that the multiplication process introduces the risk of quite a large variation in result, even when a tenable view is taken of each of the elements in the calculation. I therefore do not consider that it is necessarily sufficient for the pursuer to rely on the fact that the defenders' valuation was more than 15% in excess of a valuation that he puts forward as "correct".

[25] It requires to be borne in mind when considering the evidence of value that Mr McVicar and Mr McManus were each carrying out a retrospective valuation, some four and five years respectively after the date as at which they were valuing the subjects. While I would not go so far as to say that in carrying out such an exercise no use may be made of comparative evidence which was not available at the time of the valuation which is being tested, it is in my view necessary to be cautious in using such material. That is particularly so when the retrospective valuation involves deriving the rental rate from a single comparison. A rate derived from review of a number of comparisons seems to me to be a much more secure basis for the valuation process than one taken from the analysis of a single transaction. It seems to me that Mr McVicar's reliance on the analysis of the rent review in respect of 102 Queen Margaret Drive requires on that account to be treated with some caution. In the event, however, the initial rate which he derived from that analysis (£12.40 per square foot) is not materially different from the rate (£12.50 per square foot) that Mr McManus derived from a broader range of comparative evidence.

[26] It seems to me that since Mr McManus and Mr McVicar are so close in their views as to the rental rate properly to be derived from comparative material, and since Mr McVicar accepted that he would not quarrel with the application of 8 years purchase, there is only one aspect of Mr McVicar's evidence that suggests that a valuation of almost £25,000 (245 x 12.4 x 8 = £24,304) is not within the range of tenable values. That is his discount of £10 per square foot from the capital value to reflect the poor state of the decoration and the electrical wiring at the pursuer's shop. There seems to me to be nothing in principle against making such a deduction if the evidence supports it. The figure of £10 per square foot is arbitrary to the extent that Mr McVicar did not explain in evidence how he had calculated or estimated it. That, however, is not in my view the main difficulty about accepting it as the basis for holding that the defenders' valuation was negligent. It seems to me that the main difficulty is that, having derived the rental rate per square foot from the rent review in respect of 102 Queen Margaret Drive in November 1991, he then applies the discount to the capital rate per square foot on a comparison of the general state of the pursuer's shop (which he did not see until October 1995) with the reported state of No. 102 when it was on the market in 1993. He had no way of knowing that the state of No. 102 at the time of the rent review was the same as it was at the time when it was on the market in 1993. The reference to fresh decoration in 1993 suggests that it was not. If he had had a proper basis for thinking that the state of No.102 at the time of the rent review was materially better than the state of the pursuer's shop at the time of the defenders' valuation, a discount of the sort he made would have been appropriate in principle, subject to justification of its amount. The information about the state of No.102 when on the market in 1993, on which Mr McVicar did rely, does not in my view support the making of such a discount. I do not say that Mr McVicar's valuation was on that account not a tenable one. I do not, however, consider that it affords a secure basis for a finding that the value expressed by the defenders in their report was one which no competent surveyor exercising reasonable care in the circumstances would have expressed.

[27] In the result I am of opinion that while the evidence shows that the defenders' valuation was high, it does not show that it was so high as to be one which was not within the legitimate range of professional opinion. I am therefore of opinion that the second branch of the pursuer's case against the defenders fails.

Damages

[28] Since I have held that the pursuer has failed in both branches of his case of negligence against the defenders, the question of damages does not arise. I should, however, deal briefly, to such extent as I can in the circumstances, with the quantification of the damages to which the pursuer would have been entitled if he had succeeded on the merits.

[29] The pursuer's claim is formulated in his pleadings, as I understand them, in two parts. First, it is said that because of the overvaluation he paid £20,250 for premises which were (even if they had not been affected by rot and damp) worth less than that. Secondly, it is said that the value of the subjects was diminished by virtue of the presence of the rot and damp, and the amount of that diminution is to be measured by reference to the cost of remedying the defects.

[30] In my opinion, if the pursuer had succeeded in proving that the defenders negligently over-valued the subjects, his claim for damages in that respect would have depended on his proving that (ignoring the question of rot and damp) the shop was truly worth less than the price he paid for it. A claim for damages would therefore have arisen only on proof that the true value was less than £20,250, and the amount of the claim would have been the difference between the two figures. On the evidence, however, I do not consider that the pursuer has proved that the true value was less than the price he paid.

[31] So far as the claim in respect of rot and damp is concerned, Mr Smith for the defenders argued, under reference to Martin v Bell Ingram 1986 SLT 575 and Duncan v Gumleys 1987 SLT 729, that the pursuer had not led sufficient evidence to enable an assessment of his loss in relation to that aspect of the case to be made. There was no evidence of the value of the subjects with the rot and damp. There was evidence of the cost of remedial works, but, while such evidence could be used to check evidence of diminished value, it could not by itself be the measure of the pursuer's claim. I take the view, however, that if I can make a finding on the evidence as to the likely cost of remedial works when the rot and damp came to light, I can draw an inference as to the likely effect of the need for those remedial works on the value of the shop.

[32] The evidence of the cost of remedial work came from two main sources. The pursuer led the evidence of George McGill, until recently the principal of a timber treatment firm called Healthy Homes. Mr McGill had provided an estimate in March 1996 (No. 5/4 of process) which assessed the cost of remedial works at £11,893 (ex VAT). He said in evidence that in 1991 the extent of the remedial works was likely to have been broadly the same. He accepted that the price would have been lower, and suggested that there would have been an increase of 10 to 15% between 1991 and 1996. Although he did not lead a witness to speak to it, the pursuer also sought to place reliance on an estimate made by Richardson & Starling in May 1995 (No. 43/7 of process) which was in the sum of £9695. Treating the latter estimate as a check on the former, I would regard them as supporting the conclusion that the remedial costs would have been of the order of £10,000 in 1995 or 1996. Making a broad allowance for inflation, the 1991 cost would in my view be likely to have been of the order of £8500.

[33] The defenders led the evidence of William Muir, a retired timber infestation surveyor. He visited the shop in November 1998. His estimate of the cost of the remedial works in 1991 or 1992 was £3000 (ex VAT).

[34] It does not seem to me that I have any satisfactory means of reconciling those two views of the likely cost of remedial works had the rot and damp been addressed in 1991. I am inclined to give more weight to Mr McGill's more detailed estimate than to Mr Muir's lump sum. Beyond that, all that I am able to do is to take a broad view of the impact of the presence of the rot and damp on the value of the shop at the time of the pursuer's purchase. Had I been awarding damages in respect of the rot and damp aspect of the case, I would have awarded the sum of £7000.

Result

[35] In the event, for the reasons which I have given, I shall sustain the defenders' second and third pleas-in-law, repel the pursuer's first plea-in-law and grant decree of absolvitor.